1.

The potential benefit that may be obtained from following an alternative course of
action is called

A. opportunity benefit ; B. opportunity cost; C. relevant cost; D. sunk cost

2.Opportunity costs:

A. Are treated as period costs under variable costing;

B. Have already been incurred as a result of past action;

C. Are benefits that could have been obtained by following another course
of action;

D. Do not vary among alternative courses of action.

3. The Auto Division of Fly Insurance employs three claims processors capable of
processing 5,000 claims each. The division currently processes 12,000 claims. The
manager has recently been approached by two sister divisions. Division A would like
the auto division to process approximately 2,000 claims. Division B would like the
auto division to process approximately 5,000 claims. The Auto Division would be
compensated Division A or Division B for processing thesz claims. Assume that these
are mutually exclusive alternatives. Claims processor salary cost is relevant for

A. division A alternative only;

B. division B alternative only;

C. both Division A and Division B alternatives;

D. neither Division A nor Division B alternatives

4. Ottawa Corporation produces two products from a joint process. Information
about the two joint

products follows:

Product X Product Y

Anticipated production 2,000 lbs 4,000 lbs

Selling price per lb. at split-off P30 P16

Additional processing costs/lb after split-off (all variable) P15 P30

Selling price/lb after further processing P40 P50

The cost of the joint process is P85,000.

Ottawa currently sells both products at the split-off point. If Ottawa makes decisions
which maximizes profit, Ottawa’s profit will increase by

A. P16,000; C. P50,000;

B. P4,000; D. P10,000

5. The cost to manufacture an unfinished unit is P40 (P30 variable and P10 fixed).
The selling price

per unit is P50. The company has unused production capacity and has determined
that units could

be finished and sold for P65 with an increase in variable costs of 40%. What is the
additional net

income per unit to be gained by finishing the unit?

A. P3; C. P15;

B. P10; D. P12

6. Fe Company has only 25,000 hours of machine time each month to manufacture
its two products.

Product X has a contribution margin of P50 and Product Y has a contribution margin
of P64.

Product X requires 5 machine hours and Product Y, 8 hours. If Fe wants to dedicate

80% of its

machine time to the product that will provide the most income, Fe will have a total
monthly

contribution margin of
A. P250,000; C. P210,000;

B. P240,000; D. P200,000

7. Geary Manufacturing has assembled the following data pertaining to two popular
products.

Blender
Electric mixer

Direct materials P6
P11

Direct labor 4 9

Factory overhead @ P16 per hour 16 32

Cost if purchased from an outside Supplier 20 38

Annual demand (units) 20,000

28,000

Past experience has shown that the fixed manufacturing overhead component
included in the cost

per machine hour averages P10. Geary has a policy of filling all sales orders, even if
it means

purchasing units from outside suppliers.

If 50,000 machine hours are available, and Geary Manufacturing desires to follow an
optimal

strategy, it should produce

A. 25,000 electric mixers, and purchase all other units as needed;

B. 20,000 blenders and 15,000 electric mixers, and purchase all other units
as needed;

C. 20,000 blenders and purchase all other units as needed;

D. 28,000 electric mixers and purchase all other units as needed

8. ABC Electronics has the following standard costs and other data:

Part Beta Part Zeta

Direct materials P 4.00 P80.00

Direct labor 10.00 47.00

Factory overhead 40.00 20.00

Unit standard cost P54.00 P147.00

Units needed per year 6,000 8,000

Machine hours per unit 4 2

Unit cost if purchased P50 P150.00

In past years, ABC has manufactured all of its required components; however, this
year only

30,000 hours of otherwise idle machine time can be devoted to the production of
components.

Accordingly, some of the parts must be purchased from outside suppliers. In

producing parts,

factory overhead is applied at P10 per standard machine hour. Fixed capacity costs
that will not be

affected by any make-or-buy decision represent 60% of the applied overhead.

The 30,000 hours available machine time are to be scheduled so that ABC realizes
maximum

potential cost savings. The relevant unit production costs that should be considered
in the decision

to schedule machine time are:

A. P54.00 for Beta and P147.00 for Zeta;

B. P50.00 for Beta and P150.00 for Zeta;

C. P14.00 for Beta and P127.00 for Zeta;

D. P30.00 for Beta and P135.00 for Zeta

Questions 9 & 10 are based on the following information.

Brynles Manufacturing Company produces two products for which the following data
have been

tabulated. Fixed manufacturing cost is applied at a rate of P1.00 per machine hour.

Per Unit XY-7 BD-4

Selling price P4.00 P3.00

Variable manufacturing cost P2.00 P1.50

Fixed manufacturing cost P0.75 P0.20

Variable selling cost P1.00 P1.00

The sales manager has had a P160,000 increase in the budget allotment for
advertising and wants to

apply the money to the most profitable product. The products are not substitutes for
one another in the

eyes of the company’s customers.

The manager may devote the entire P160,000 to increased advertising for either XY-
7 or BD-4.

9. The minimum increase in peso sales of either XY-7 or BD-4 required to offset the
increased

advertising is

A. B. C. D.
XY-7 P160,000 P640,000 P 80,000 P
80,000

BD-4 P320,000 P960,000 P960,000

P320,000

10. Suppose Brynles has only 100,000 machine hours that can be made available to
produce

additional units of XY-7 and BD-4. If the potential increase in sales units for either
product

resulting from advertising is far in excess of this production capacity, which product
should be

advertised and what is the estimated increase in contribution margin earned?

A. Product XY-7 should be produced, yielding a contribution margin of P75,000;

B. Product XY-7 should be produced, yielding a contribution margin of P133,333;

C. Product BD-4 should be produced, yielding a contribution margin of P187,500;

D. Product BD-4 should be produced, yielding a contribution margin of

P250,000

11. Black Knight Enterprises is experiencing a growth rate of 9% with a return

on assets of 12%. If the debt ratio is 36% and the market price of the
stock is $38 per share, what is the return on equity?

A. 7.68% ; B. 9.0% ; C. 12.0%; D. 18.75%.

12. Assume Meyer Corporation is 100 percent equity financed. Calculate the
return on equity, given the following information:

(1) Earnings before taxes = $1,500

(2) Sales = $5,000

(3) Dividend payout ratio = 60%

(4) Total assets turnover = 2.0

(5) Tax rate = 30%

a. 25%; b. 30%; c. 35%; d. 42%.

The financial statements of Neil Company are given below.
13. Refer to the financial statements for Neil Company. The firm's current
ratio for 2009 is __________.
A. 1.98;
B. 2.47;
C. 0.65;
D. 1.53;
E. None of these is correct.

14. Refer to the financial statements of Neil Company. The firm's market to
book value for 2009 is ____.
A. 0.7256;
B. 1.5294;
C. 2.9400;
D. 3.6142;
E. None of these is correct.

15. Wheel Corp. wants to increase its current ratio from the present level of
1.5 when it closes the books next week. The action of __________ will have
the desired effect.
A. payment of current payables from cash;
B. sales of current marketable securities for cash;
C. write down of impaired assets;
D. delay of next payroll;
E. None of these is correct.

Questions 16 thru 19 are based on the following information.

16. Times interest earned is

a. 27.38 times; b. 24.21 times; c. 16.52 times; d. 48.48 times

17. Debt ratio is

a. 27.38%; b. 24.21%; c. 16.52%; d. 48.48%

18. Payout and Retention Ratio

a. 27.38%; b. 24.21%; c. 16.52%; d. 48.48%

19. Return on Assets (ROA)

a. 27.38%; b. 24.21%; c. 16.52%; d. 48.48%

Use the following information to answer items 20 - 23:

For its most recent year a company had Sales (all on credit) of $830,000
and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts
Receivable were $80,000 and its Inventory was $100,000. At the end of the
year its Accounts Receivable were $86,000 and its Inventory was $110,000.

20. The inventory turnover ratio for the year was

a. 4.8; b. 5.0 ; c. 7.9; d. answer not given